Asia stocks, bond yields climb as trade war fears ebb

Asian stocks rose in step with their global peers while safe-haven bonds retreated on Tuesday, as signs Sino-US trade hostilities might be easing for now helped restore investor confidence after the previous session's rout.

Supporting the market mood, US President Donald Trump on Monday flagged the possibility of a trade deal with China and said he believed Beijing was sincere in its desire to reach an agreement. Global markets had been roiled at the start of the week by new tariffs from the world's two largest economies.

MSCI's broadest index of Asia-Pacific shares outside Japan was up 0.3 percent after dropping 1.3 percent the previous day. The Shanghai Composite Index advanced 1 percent.

South Korea's KOSPI added 0.8 percent and Japan's Nikkei rose 1.1 percent.

Equity markets may have found traction for now but the longer-term outlook for risk assets, buffeted repeatedly by trade concerns, remained shaky.

"There is still a large element of uncertainty regarding the U.S.-China trade dispute. It remains difficult to foresee a resolution, and this will continue to weigh on equity market sentiment," said Shusuke Yamada, chief Japan FX and equity strategist at Bank Of America Merrill Lynch.

"Apart from the trade war, the equity markets also have to keep an eye on Brexit proceedings, monetary policy of key players such as the European Central Bank and moves in the Chinese yuan."

China's onshore yuan nudged down to a fresh 11-year low of 7.1566 per dollar.

China has allowed the tightly-managed yuan to slide some 3.6 percent so far this month as trade tensions with the United States worsened. This has triggered fears of a global currency war, in which countries try to weaken their currencies in an attempt to soften the blows of a broader economic slowdown.

The benchmark 10-year U.S. Treasury yield was at 1.523 percent, pulled back from a three-year low of 1.443 percent reached on Monday on the back of wide-spread risk aversion.

The Japanese 10-year government bond yield was up 2.5 basis points at minus 0.255 percent after plumbing minus 0.285 percent on Monday, its lowest since July 2016.